Marketing-Sales
The advertising to sales promotion ratio has changed during the past decade from what was once a 60:40 ratio, to what is now a 75:25 ratio. Reasons behind this change include the fact that it is a much more competitive marketplace overall, and that companies must compete for sales in an aggressive manner. Another measurement to consider is the Lifetime Value of Marketing Model that values the dollars spent on advertising over the life of a particular product, not just the life of the ad campaign itself.
"The so-called Lifetime Value of Marketing Model makes a strong case for sharper advertising copy, a higher advertising-to-sales dollar ratio." (Neff 2000-page 4) Most for profit business' consistently study industry trends, and are copiously aware of the costs of producing and selling their product. If studies show that more profits can be generated by spending additional advertising dollars on each sale, then most business' will likely spend those dollars.
Another factor to consider as to why the ratio has changed so dramatically is due to the lower costs of producing the products (in inflation adjusted dollars). With globalization of production the costs to produce the product (whatever the product is) is generally lower percentage wise than it was just a few short years ago. Companies can apply those additional dollar savings to other areas, and the advertising area makes a certain amount of sense for using those savings, especially if spending such dollars on advertising leads to more sales, and even greater profitability.
Neff states, "the net effect is that a one-year campaign can pay off with a 9% spike in sales over a decade." (pg 4) Those are numbers that will help any companies coffers.
Works Cited
Neff, Jack (2000) New Model: Ads pay off Longer Than First Year: Findings could shift balance with trade promotion, Advertising Age, Vol. 71, pg 4, Accessed July 22, 2007 http://0find.galegroup.com.salty.slcpl.lib.ut.us:80/ips/infomark.do?&contentSet=IACDocuments&type=retrieve&tabID=T003&prodId=IPS&docId=A59847029&source=gale&srcprod=GRGM&userGroupName=slpl&version=1.0.
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